Tales of success from the mid-Missouri timber industry

On the corner of Bucky Pescaglia’s desk is a small printed note that says, “Wood is wonderful.” With a brief look around the office, it’s apparent he believes it: wood floors, wood panels, wood furniture and a wood nameplate.

“We can do that,” he tells a client on the phone. “We’ve got 50,000 feet of lumber in the kiln that’s going to be dumped next week.” Bucky is the president of Missouri Pacific Lumber (MoPac), based in Fayette, Mo. Over the past five years, production has increased 130 percent, from 1.3 million feet of lumber in 2009 to 3 million feet of lumber in 2013. Rounding out 2013, MoPac experienced a sales rush so large that it sold half of its inventory during the fourth quarter alone — more than the second and third quarter combined.

“We’re now working overtime to try to replenish our inventory to satisfy the demand,” Bucky says.

 

From bump to crash

MoPac began, literally, with a bump and a crash. It was 1935 when Louis Pescaglia got into a car accident with a timber driver while he was delivering coal in central Illinois. The other driver was uninsured and traded Louis some timber to pay for damages to his car, and Louis soon realized he could make a better living selling timber than delivering coal.

In 1960, Jim Pescaglia joined his father in the business, and the pair began to grow out of mining and crating woods into furniture hardwoods. By 1980, Jim wanted to expand the business and purchased a five-acre sawmill in New Franklin, Mo., which grew it to 36 acres by 1993.

Then a simultaneous blessing and curse struck the company: the flood of 1993. Two miles from the river and without flood insurance, MoPac was left under 14 feet of water with a tough decision. The business had outgrown its space but needed to remain close to the company’s timber sources and employees. The Pescaglias landed 12 miles away, in Fayette. By the late 1990s, the original sawmill in Illinois had split off under the ownership of other family members, and MoPac stood solid in its Fayette facility.

More than 70 years after the initial crash came a crash of a different nature. From 2003 to 2012, the number of establishments in the forestry and logging industry nationwide decreased 30 percent, according to data from the Bureau of Labor Statistics. Bucky estimates that 200 to 300 mills similar in size to MoPac closed during the recession alone, which he says hurt everyone on the spectrum, from high-end woods such as walnut to pallet makers. But MoPac relied on some of the lessons learned through previous trials, an emergency fund and the resilience to come back strong when the markets improved.

Within the past year, those efforts have proven useful; demand has continued to increase while supply is slow to keep up. According to Ryan Pescaglia, vice president of MoPac and Bucky’s cousin, the process from log to lumber can take an average of half of a year. “If you would have been here a few years ago,” he says, signaling to a handful of large metal sheds full of lumber, “these would have been twice as full. During the last six or eight months, our inventory has dropped substantially.”

Another aspect of MoPac’s success has been its specialization and location. According to the Missouri Department of Conservation, Missouri has more than twice as many American black walnut trees than any other state — more than anywhere in the world, in fact. And though American black walnut only accounts for between 2 and 3 percent of the total lumber market, for the past five years, it has accounted for more than 90 percent of MoPac’s production.

Walnut is a dark, rich wood, known for its use in luxury goods such as Rolls Royce cars and Learjets. “It’s a bit of a niche,” Bucky says, “but we’d rather specialize in something and do really it well rather than offer all kinds of species.”

 

Running the mill

More than 90 percent of MoPac’s timber comes from middlemen who purchase timber from various forests, the majority from northwest Missouri, a good portion from northeast Missouri and a smaller portion from southern Missouri, which has many trees but poor soil quality.

The top 5 percent of logs that MoPac buys are resold to make veneers, and the rest are run through the sawmill: first debarked, then sawed into blocks, dried, treated in the kiln, stored and eventually sold. Anything left over is sold or used in MoPac’s production. The bark is sold to a company in Auxvasse that makes mulch for consumers; the leftover wood goes to a company that creates children’s playground wood chips and to the University of Missouri power plant’s biomass boiler; and the sawdust is used to fire MoPac’s own kilns.

Now, as more furniture is produced outside the United States, more than 70 percent of MoPac’s products are exported abroad, particularly to Germany, Poland, the United Kingdom, Ireland and Japan. Of the 30 percent that remains in the United States, most goes to the East Coast and the South. MoPac sells only a small portion of its goods to buyers in the mid-Missouri region. In fact, Bucky estimates that one-third of its lumber is sold directly to end users, one-third to brokers and the final one-third to wholesale distributors.

A big challenge facing the industry now, Ryan says, is the affordability of collecting timber.

“There are more trees now than there were when my grandfather started the company, but with insurance, fuel and machinery costs and more, it’s difficult to keep a good supply of logs,” Bucky adds.

Many logs are exported to countries with lower labor costs. “Even if the timber comes from here, that only creates one or two jobs,” he says. “When it’s processed [at MoPac], that’s supporting 45 local jobs.”